Top Small Business Loans for Minorities - An In-Depth Look
BlueVine is an online lender that offers short-term loans and lines of credit of up to $250,000 with a one-year repayment term or invoice factoring up to $5 million for monthly invoices.
To qualify, you’ll need:
- A 600 credit score
- To show annual business revenue of at least $100,000
- Online application
- Less information to be provided
- Fast application outcomes
- Funds are more quickly available
- Expensive funding
- Limited financing options
While you get speedier application outcomes and quicker access to your SB funds, you’ll end up paying more with BlueVine than with a conventional lender.
We’ve also found that BlueVine often stops providing certain products when they need to concentrate on interventions like the Paycheck Protection Program (PPP), so check the product availability before applying.
Fundbox offers business revolving lines of credit and one-time payment term loans, both with limits up to $150,000.
With a revolving line of credit, you can choose between a 12- or 24-week repayment program each time you draw. The term loans have a 24- or 52-week repayment plan with no origination fees or prepayment penalties applicable to them.
Fundbox qualifying requirements are that:
- You should be willing to provide some basic business details so their system can gain some insight into your business
- You should have a business bank account that reflects at least two months of activity in any supported accounting software, or at least three months of business transactions
- Your business should operate in one of the 50 states or one of the following supported US territories: Guam, Northern Mariana Islands, American Samoa, the US Virgin Islands, and Puerto Rico
- Quick outcome turnaround times
- Line of credit revolves, so constant access to cash
- They look at your business, not you
Fundbox, in our opinion, is a funding option worth considering.
Kabbage, has currently placed their lending products on hold, but you can join a waitlist and ask them to contact you once a certain product becomes available again. Kabbage usually offers flexible business lines of credit up to $250,000 with terms of 6, 12, or 18 months to repay.
Their funding eligibility requirements are:
- Trading at least one year
- Revenues of $50,000 per year or $4,200 per month over the preceding three months
- Must have a checking account
- Should have a tax ID number
- Conducting business in any of the 50 US states or US territories
- A single monthly fee, which includes interest, admin, and origination
- No minimum credit score
- Don't consider business credit score
- Quick funding
- Consider owners that have declared bankruptcy once, at least one year from discharge
- High cost of finance
- Personal guarantee required
- A hard pull on personal credit once finance offer accepted
With Kabbage, check funding availability before applying.
OnDeck offers revolving credit lines from $6,000 to $100,000 and business term loans of $5,000 up to $250,000. Credit lines have a 12-month repayment term, while you can repay term loans in up to 18 months.
To qualify, you must have:
- Been in business for at least 12 months
- A business bank account
- A credit score of 600
- Annual business revenue of $100,000
- Easy application process
- Quick access to funds
- More straightforward qualification process than bank or SBA loans
- Products meet a wide range of funding needs
- Funding can be costly
- More frequent repayments required (daily or weekly)
- A lien is placed on business assets, and a personal guarantee is required
OnDeck is considered an excellent option for minority business owners who need capital for a variety of business needs.
SBA 7(a) loans—made by qualified lenders—are loans guaranteed by the U.S. Small Business Administration (SBA), a federal entity founded in 1953 to promote small business growth. This loan type can be used to provide up to $5 million in capital funding.
Maximum repayment terms span from 10 to 25 years, and interest rates charged on 7(a) loans are some of the lowest available.
To qualify, you must:
- Be officially registered as a for-profit business
- Have fewer than 500 employees
- Show less than $7.5 million revenue on average per year for the last three years
- Have a net business income of under $5 million (after taxes and excluding carry-over losses)
- Have an actual net worth of less than $15 million
- One-third of SBA loans go to minority-owned businesses
- Less costly financing
- Government backing
- Longer approval times
- Slower access to funds
Time allowing, we consider this a good option for minority SB owners. They’ll be able to apply more of their profits toward business growth rather than debt repayment due to lower interest rates.
The Community Advantage (CA) Loan Program—also run by the SBA—is structured to meet the needs of SBs operating in underserved markets. This program encourages CA lenders such as nonprofit organizations to make up to $250,000 in loans to minorities, veterans, women, and other underserved business owners.
The SBA guarantees up to 85% of an approved loan amount, which helps SB owners who don’t qualify for traditional financing.
You will need to:
- Demonstrate creditworthiness
- Show your ability to repay the loan
- Lack of collateral or assets won't disqualify you
- Minorities (and other underserved) get preference
- Cheap financing
- Longer approval process
- Loan amounts available less than typical SB loans
To apply, contact your local SBA district office.
The 8(a) Business Development Program is an assistance program for small businesses with a disadvantaged owner(s). Essentially not a loan, but a certification program, 8(a) offers a wide range of assistance to firms owned and controlled by socially and economically disadvantaged individuals.
To level the playing field for SBs, the government limits competition for some of its contracts to those businesses that form part of the 8(a) Business Development Program.
- Your business must be at least 51% owned by a person from a socially and economically disadvantaged background
- The owner's average gross income and personal net worth for the preceding three years must be $250,000 or less
- The owner's assets must be $4 million or less.
- Under federal law, minorities are considered socially disadvantaged
- You can apply for certification online
Our opinion is that the 8(a) program assists many ambitious entrepreneurs to gain a niche in government contracting.